Each week, I’ll give an overview of a stock and Licia Leslie will follow that up with a chart analysis the next day. Bill Griffo will chime in with macro analysis and Andrew Giovinazzi will then finish out the week with a volatility breakdown.
Have a stock YOU want us to review? Email my team here. – Mark
Hey Traders,
Andrew Giovinazzi here.
If you haven’t noticed by now, each week here in the Pit Report the Option Pit team delivers the charts, fundamental analysis, and volatility insights that make a stock interesting to trade.
- Think of the candles as the when
- Think of the fundies as the why
- Think of the vols as the how
My job is to use volatility to help with positioning. Basically, I’m asking what price are the options and what makes a good trade?
Our candidate below is Nordstrom Inc. (Ticker: JWN), coincidentally one of my favorite places to shop back when I was a floor trader living in San Francisco.
Now that I am in Maine, I mostly go to LL Bean a couple towns away. But Nordstrom is still a great store on the West Coast.
JWN implied vols on a 30, 60, 90 day basis
Click here for JWN’s compelling pricing right now.
Activist Investors Circled in Early Feb.
As you can see on the chart below, JWN had a big spike followed by the long slow drop after traders realized it would not change much in the short-term.
That short-term was dominated by the Fed and rates. The investor speculation sent implied vols sky high in early February. As investor interest waned, the implied vol dropped with it.
JWN six-month chart with one-day candles
Now JWN is sitting at the bottom of the trading range and IVs are jumping again.
I think that is more a symptom of market volatility than anything right now as broader market volatility made six-month highs this last week on bank collapse fears.
That also brings higher option premiums and JWN at a lower price. The activist investor interest should bring some support for the stock, but I would still prefer to work out-of-the-money.
With IV this high selling out-of-the-money put vertical spreads would work well.
Even selling JWN Jan. 2024 17.5 or 15 puts in lieu of buying stock would bring yields of 20% and 10% respectively.
Right now use the higher implied volatility to grab a good property at a bargain price.
AG